Dollar Tree's offer for Family Dollar is worth about $8.5 billion in cash and stock, or $74.50 a share. The bid from Dollar General, disclosed on Monday, is an all-cash offer for $78.50 a share.

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FOR THE RECORD

An earlier version of this post said Family Dollar is based in Goodlettsville, Tenn. The company is actually based in Matthews, N.C.

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Snubbing the higher offer could spark a fight for control of the nation's second largest dollar chain. Shares of Family Dollar fell slightly to $79.50 at midday Thursday, but that price -- higher than Dollar General's offer -- indicates Wall Street investors expect the battle to continue.

Eric Gay / Associated Press

Dollar General has suggested Family Dollar CEO Howard Levine of looking out for his own self-interest in rejecting their offer for the chain. Here, a Dollar General store in San Antonio.

Dollar General has suggested Family Dollar CEO Howard Levine of looking out for his own self-interest in rejecting their offer for the chain. Here, a Dollar General store in San Antonio. (Eric Gay / Associated Press)

Howard Levine, chief executive of Family Dollar, said the board has been looking at antitrust issues that could arise from joining forces with Dollar General since the beginning of the year.

The board "unanimously concluded that it is not reasonably likely to be completed on the terms proposed," he said in a statement.

Dollar General said it was disappointed by the board's decision and was willing to share its own antitrust analysis with Family Dollar. The Goodlettsville, Tenn. company said it remained committed to buying its smaller competitor.

A day earlier, Dollar General Chief Executive Rick Dreiling said in a letter to Family Dollar's board that his retail chain been interested in acquiring the company for years. However, he said Family Dollar failed to follow up with Dollar General before agreeing to a deal with Dollar Tree.

"Howard Levine expressed his own interest in the social issues of a combination, including, among other things, his desire to be chief executive officer of the combined companies," Dreiling wrote.

"We cannot help but question whether Dollar General's failure to embrace such requests by Mr. Levine weighed into Family Dollar's decision to pursue an agreement with Dollar Tree," he said.

In its proposal, Dollar Tree had agreed to unload up to 700 stores to avoid antitrust problems and gain government approval for the deal.

On Thursday, Levine dismissed allegations that he was looking out for his own future, saying the letter from Dollar General contained "blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General's proposal."

The two suitors are likely to have different plans for Family Dollar.

Dollar Tree said it would keep the Family Dollar brand and maintain many jobs at the Matthews, N.C., headquarters. Levine, son of company founder Leon Levine, also would remain on the job for at least two years.